“…never before a car like it” – Ford Edsel marketing campaign, 1957
When my stepson married in Texas in 2019, he had already bought the car that would whisk him and his bride away from the wedding. It was a 1959 Ford Edsel, and as you’ll see from the picture it was a beautiful car.
But it was a commercial failure, perhaps one of the biggest in history (Brooks, 2014). The Edsel was unveiled with a fanfare in September 1957, after an investment of a quarter of a billion dollars including what was then the costliest marketing launch ever. It was discontinued just three years later in November 1960, having reportedly lost the company more than $350 million. To recoup its investment Ford had needed to sell at least 200,000 vehicles in the first year, but only sold less than 110,000 during the whole life of the product. What happened? Ford needed a “medium priced” brand for owners to move to once they had enough income to no longer want to be seen in an “inferior caste” brand such as Ford or Chevrolet. Ford’s customers did not typically trade up to a Mercury (owned by Ford) but instead opted for products from competitors such as Oldsmobile or Buick. According to one Ford executive “we have been growing customers…” for the competition. The Korean War delayed the start of work on a new car, but by 1954 Ford was ready to invest in their vison – a vision that was already a few years old. It seems that they invested in what they thought people wanted. Decisions on specification and styling were made with little regard for customer preference. According to Brooks “it was arrived at without even a pretense of consulting the polls, and by the method that has been standard for years in the designing of automobiles – that of simply pooling the hunches of sundry company committees.” There was an attempt to solicit input on the styling and image of the car from interviewing groups of people in two states, Illinois and California, which returned much arguably interesting but useless information including insights into potential customers’ cocktail-mixing abilities. But ultimately, it seems that intuition supplanted research.
Things became (even) more bizarre when naming the car. The poet Marianne Moore was enlisted to come up with names. Had one of her suggestions been accepted, my stepson might have been married in a Ford Intelligent Bullet or a Ford Pastelogram, but it seems that her suggestions did not resonate in Detroit. Instead, Foote, Cone & Belding, a Madison Avenue advertising agency, came up with a list of six thousand (you read that right) names for Ford to select from. Based on that list, he could have been married in a very palindromic Ford Drof. Ultimately, under pressure of time, and with presses waiting to have the name added to the idle tooling, the company decided to name their new car after the only son of the original Henry Ford: Edsel.
Now Ford did not want to sell the new car through their old dealers. They set up a network of exclusive dealerships for Edsel, either by poaching dealers who had contracts with competitors, or cannibalizing dealers currently contracted to Ford or Lincoln-Mercury. They had almost 1,200 such dealers by launch day, and an estimated 2.8 million people saw the car in those showrooms on that very same day. But hardly any of them bought one. Over the three years of the life of the car, those dealers sold an average 93 cars each.
What went wrong? Put simply, the world changed while Ford was focused on its new flagship. By the autumn of 1957, when the Edsel was introduced, manufacturers of medium-priced cars were struggling, and consumers were increasingly attracted by less expensive “compact” models. It is not necessarily the fault of Ford that the market changed significantly during the time it took to develop and launch the Edsel, especially given the delay in approving the project. But it is their fault that they were too inwardly focused, and too preoccupied with their own world view, that they failed to notice and thereby failed to take appropriate action.
Your great idea is nothing without a customer. You must create value for customers by giving them what they need, and, unfortunately for you, what they need can change. It is therefore exceptionally important to make the effort to understand your customers’ needs, lives, business, future, trends, drivers, competitive landscape. To put yourself into their shoes, to care as much about their life or their business as you do your own. To see where their opportunities are and how those lead to yours. For business-to-business (B2B) customers, to understand their market, their value drivers and their logistical and commercial environments and be able to integrate these in your innovation process. And where your customers are concerned, you must always think in terms of solutions to their problems – current and future – and never just in terms of your own products.
You need to think of innovation as a process, not an activity, and recognise that it is in fact a process that makes up a value chain. The flow diagram below is based on an analysis of many new product development projects (Hansen & Birkinshaw, 2007). and teaches us that the innovation value chain flows from generating ideas firstly to using those ideas to create value for customers and secondly to capturing part of that value for our own organisation. It is essential to understand how value is created and captured, and this must be continuously reviewed throughout the process for innovation to succeed.
In the case of the Edsel, timing turned out to be everything, the value evaporated before the product was ready. And that was in the 1950’s. As I have noted in previous blogs, the world has changed beyond recognition since then and the pace of change is unprecedented. This provides opportunity, of course, but even if new products, services or solutions can be introduced quickly, the process still needs to be flexible to changes in the market, as Ford discovered to their cost. In the coming weeks and months, I will be blogging ideas and techniques that can help us all to make the right decisions, and avoid the wrong ones, in the face of these unprecedented challenges. Now, you absolutely have to execute projects rapidly, to minimize the risk that your product will be obsolete by the time it comes to market.
- Innovation is a process with a value chain
- The value chain starts with the idea but also encompasses creation and capture of value
- All successful innovation requires a customer need
- You must give them what they need – not necessarily what they want
- You have to execute projects rapidly, to minimize the risk that your product will be obsolete by the time it comes to market, but speed may not be enough
- Customers and markets can change
- Any product, service or solution development must sufficiently flexible to respond to those changes.
References and further reading
Brooks, J. (2014). Business Adventures: Twelve Classic Tales From the World of Wall Street. New York: Open Road.
Hansen, M., & Birkinshaw, J. (2007). The Innovation Value Chain. Harvard Business Review, June.
© 2020 J M Clegg Ltd